Marg plans to execute Rs 3000cr orderbook in next 2 yrs

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Marg plans to execute Rs 3000cr orderbook in next 2 yrs

GRK Reddy, Chairman and Managing Director of Marg, in an interview with CNBC-TV18’s Gautam Broker and Reema Tendulkar, gave his perspective of the fourth quarter performance and their divulged future plans.

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Marg declared its fourth quarter and FY11 results. The company's Q4 net sales were up 72% (YoY) at Rs 361 crore versus Rs 210 crore in the previous year. During the same period, its expenditures were up 74% (YoY) at Rs 318 crore versus Rs 182 crore.

The company's net profit was down 36% at Rs 18 crore versus Rs 29 crore and EBITDA was up 57% at Rs 45 crore versus Rs 29 crore.

GRK Reddy, Chairman and Managing Director of Marg , in an interview with CNBC-TV18's Gautam Broker and Reema Tendulkar, gave his perspective of the fourth quarter performance and divulged their future plans.

Below is a verbatim transcript of the interview. Also watch the accompanying video.

Q: You have had decent revenue growth of about 72% in Q4. Your margins declined by about over 100 basis points. May be some of the high margin internal EPC contracts didn't contribute as much. Do you expect margins to continue declining and then to stabilise at the current levels?

A: This year, we have external EPC business which has taken almost about 40% of our topline. In external EPC, the PAT is about 5-6% which will now stabilise going forward. We will be having about 40% of external business of which EPC will come from L&T , Petronet LNG and then Mahe fishing harbour.

Q: What's the orderbook update at this point?

A: The external orderbook is about Rs 600 crore and internally, we have about Rs 2400 crore. About Rs 3000 crore is the orderbook as on today which we need to execute in next two years time.

Q: What are the kinds of volumes for external EPC business and for the entire business on a consolidated basis in FY12? What would your margins look like?

A: The external EPC mostly comes from BHEL , National Building Construction Corporation (NBCC). We have been doing marine works like L&T on the break water supply side and Petronet LNG terminal in Kochi. We have been also working for corporation of Chennai, HPCL , IOCL and also director general of Married Accommodation for the defence ministry work.

Q: What's the kind of operating margins that you give companies like BHEL because your share of external EPC has increased quite significantly in FY11? Going in FY12, there would be a big chunk of your revenues coming in from there. What are the margins on that? In totality, what would your margins look like?

A: Our margins would be about 6%. We have been showing minimum 40% year-on-year growth and on that basis, we should have a reasonably good and stabilised margin of about 5-6% PAT going forward. We are into engineering side procurement and construction. The margins there will be better.

We will have a PAT of 5-6% with a lot of external orders, out of which mostly would be public sector undertaking. We have strengthened our northern operations and we are working in NCR region. A lot of construction activity and new projects is taking place in NCR region.

Q: Could you tell us a little more about the increase in your interest expense? It has gone up about 300 times at Rs 10 crore.

A: We have grown in our business. We have increased our cash credit. Our interest has increased in port business. This year, it will be slightly stabilised or lower because the rating for the company has gone up. It has show a PAT of Rs 24 crore with a good EBITDA of Rs 79 crore on a topline of Rs 170 crore.

Most of the debt comes from the port and there the interest rates have been reduced because the rating has gone up. In the EPC business, we were able to reduce the cash credit interests because of the consolidated operations of the company. The company has also stabilised.

All the businesses are reasonably doing well. This year, the interest rates will be downwards as far as the company is concerned because the rating and consolidated profits are better.